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Abraaj, a private equity firm in Dubai that managed $14 billion at its peak, ran into trouble last month after using borrowed money to pay salaries and other costs that were not covered by the management fees it charged investors. Abraaj is accused of commingling funds, a term used to describe using money from investors for purposes not originally agreed for. The company filed for a court-led winding down process after it was unable to repay its debts. Bill and Melinda Gates Foundation and the World Bank are amongst the long list of investors.

Arif Naqvi, 58, the founder and chief executive of The Abraaj Group, surrendered control of the firm in June. It was revealed that for years the main revenues did not cover operating costs; Abraaj borrowed hefty capital and now owes creditors over $1 billion. The firm collapsed once lenders cut ties, rendering grave losses and lawsuits. Arif Naqvi has also been accused of writing faulty checks to a regional businessman with whom he had failed to reach a debt settlement with. Essentially, Abraaj’s reliance on multiple levels of leverage created a highly unstable business model; such a model is unusual for the private-equity industry, the court-appointed liquidators that are dismantling the firm.

A team of investigators at PricewaterhouseCoopers stated that Abraaj’s use of lenders’ money to cover operating expenses left the firm “sensitive to volatility and potential liquidity crises.” They are now selling Abraaj assets to pay creditors and are investigating allegations of “mismanagement, comingling of funds and misappropriation of assets.” A report by PwC found that the firm’s $3 million monthly payroll exceeds the money it earned in fees by around $800,000.

Abraaj has denied any wrongdoing and said all missing money had been returned to investors. The emirate’s top regulator, the Dubai Financial Services Authority (DFSA), has been nearly silent since the allegations emerged. Former Abraaj employees claimed the DFSA did not perform some of their regular customary supervisory visits in recent years. They also stated that the irregular money flows could have been detected at an earlier stage. However, some of the same employees also questioned whether supervisory visits would have achieved any results. DFSA’s response has made investors nervous about the regulatory environment in Dubai, which built this flourishing financial district. Dubai was supposed to be a rules-based setting in the Middle East’s not so transparent financial world, but fears about corporate governance and corruption are now on a rise.